Many taxpayers are unable to meet their federal tax obligation for a variety of reasons and therefore find themselves in trouble with the IRS. When this happens there are a number of different solutions available in settling the issue but first there are some things to consider in deciding how to approach the problem. There are three main approaches and they are each outlined below.
Approach Number One - Ignore the problem. This is the worst approach of all and will only lead to further problems. The IRS may seem slow to act at first compared to what we as consumers are used to and that can give the taxpayer a false sense of security. However, on the contrary, phone calls or emails can begin from a commercial creditor very shortly after a payment is overdue. That being the case a customer will know very quickly that they are being pursed for what they owe to the creditor.
So if a taxpayer has unfiled federal income tax returns or unpaid taxes they should not ignore an IRS notification and request to file or demand for payment. Further action by the service can include filing a substitute return for the taxpayer, accumulation of penalties and interest, and collection action. Collection action can be anything from a federal tax lien to a federal wage garnishment or bank account levy and anything in between.
The IRS DOES have the legal authority to garnish wages, levy bank accounts, and seize assets in order to pay a tax debt. And the taxpayer should know that there IS activity going on within the IRS regarding their account in spite of the fact that they may not be getting daily correspondence. The IRS may give the taxpayer plenty of time to act but once that time is up their action is decisive and devastating.
Approach Number Two - Interact with the IRS myself. This may be a better approach than approach number one, but that is only because it keeps the taxpayer from being involuntarily compelled to pay their taxes. Simply being in compliance with filing and payment laws may keep the taxpayer out of legal hot water but it won't actually save them any money. And the IRS won't present options that are designed to lower the taxpayer's debt. Remember that the IRS's job is to assess and collect tax and ensure that taxpayers pay their fair share; it is not to reduce the obligation of the taxpayer.
They will only present options to keep the taxpayer in compliance with filing and payment laws but they will not present any options that will actually reduce their tax debt. If a taxpayer is interacting with the IRS themselves in order to avoid spending money on representation fees they should consider the fact that any money saved on those fees is very likely money spent on tax debt they will still owe...which brings us to approach number three.
Approach Number Three - Retain professional representation. Having tax problems with the IRS is a serious matter. A taxpayer may be able to come into compliance with tax filing and payment laws by interacting with the IRS themselves. However the depth of knowledge required to access certain laws that can save them money are beyond the vast majority of taxpayers' abilities. Professionals who deal with IRS collection processes and laws are well worth the money they are paid as they save taxpayers thousands of dollars by having penalties eliminated, interest reduced and, in cases that qualify, amounts of the original tax obligation reduced.
In addition to money saved the taxpayer will have an advocate interacting with the IRS on their behalf so they don't have to. The mere fact that the taxpayer is spending money on a professional tells the IRS they are taking the matter seriously and contributes significantly to the success of any requests that the taxpayer submits. Also the IRS realizes they are dealing with a third party that has a greater depth of knowledge than the taxpayer and that means that any requests submitted will be based on rational, persuasive arguments and not on an emotional plea from the taxpayer simply because they don't want to pay.
Conclusion: Don't ignore the problem or go it alone when you're having IRS tax problems. And don't wait until the IRS levies your bank account, garnishes your wages or until they are about to seize your assets, seek professional representation. It will be the best money you will ever spend because it is money spent that will save you thousands and give you back your life.
Trace George is a Certified Public Accountant and is the Executive Vice President of Action Tax Relief headquartered in Abilene, TX. Action Tax Relief provides services to individuals who are facing tax problems with the IRS. We help the taxpayer explore their options for tax relief including penalty abatements and offers in compromise. Action tax relief is not a CPA firm but we partner with consultants and CPAs in order to assist taxpayers through the process of dealing with the IRS to resolve their tax issues, including liens, levies and garnishments.
(c) Copyright Trace George. All Rights Reserved Worldwide
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